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Stock Market News for Sep 29, 2022

Wall Street closed sharply higher on Wednesday rebounding from a six-day losing streak. Stiff decline in U.S. government bond yields following an unexpected intervention of the Bank of England to stabilize the UK’s financial market helped a turnaround for the U.S. stocks. All the three major stock indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) climbed 1.9% or 548.75 points to close at 29,683.74. The blue-chip index has terminated a six-day losing run. Notably, 22 components of the 30-stock index ended in positive territory while 8 in red.

The tech-heavy Nasdaq Composite finished at 11,051.64, rising 2.1% or 222.13 points  due to strong performance of large-cap technology stocks. However, major gainer of the tech-heavy index was the biotech bigwig Biogen Inc. BIIB, shares of which soared 39.9%. Biogen carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 jumped nearly 2% to end at 3,719.04. All 11 broad sectors of the benchmark index closed in positive zone. The Communication Services Select Sector SPDR (XLC), the Materials Select Sector SPDR (XLB), the Consumer Discretionary Select Sector SPDR (XLY) and the Energy Select Sector SPDR (XLE) rallied 3.4%, 2.6%, 2.7% and 4.4%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was down 7.4% to 30.1. A total of 11.7 billion shares were traded on Wednesday, higher than the last 20-session average of 11.4 billion. Advancers outnumbered decliners on the NYSE by a 5.82-to-1 ratio. On Nasdaq, a 3.66 -to-1 ratio favored advancing issues.

Bond Yields Decline on BoE Intervention

The Fed has hiked the Fed Fund rate by 3% so far this year and has raised the median of the Fed Fund rate to 4.4% in September from 3.4% in June. This means that the range of the benchmark lending rate at the end of 2022 will be 4.25-4.5%, indicating a 75 basis-point and 50 basis-point interest rate hike in November and December, respectively.

As interest rate is surging in the United States, global investors are trying to hold U.S.-dollar denominated assets to get higher returns. Consequently, the ICE U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, has skyrocketed to 20-year high in 2022.

The British pound has fallen to its all-time low with respect to the U.S. dollar following a mini budget of the newly elected UK government that includes a large swathes of unfunded tax cuts  in order to boost growth. The sterling came down to almost a parity with the U.S. dollar as investors shifted from U.S. bonds to dollar-denominated assets resulting in soaring yields on UK gilt-edged securities. 

In order to restore financial market’s stability, the Bank of England has decided to suspend its decision to sell gilts next week, Surprisingly, the central bank has decided to start temporarily buying long-dated bonds in order to inject liquidity in the system.

Following the Bank of England’s unexpected decision, the yield on the benchmark 10-Year U.S. Treasury Note  declined 25 basis points to 3.705%. This marked the biggest single-day decline of 10-Year yield since 2020. Earlier in the session, the yield touched 4.019%, highest since October 2008.

Economic Data

The National Association of Realtors reported that pending home sales dropped 2% sequentially n August. The consensus estimate was for a decline of 1.4%. July’s data was revised upward to a drop of 0.6% from a decline of 1% reported earlier.

For the week ended Sep 23, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.2 million barrels from the previous week.

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